Indonesian Coffee Premium Seen Rising as London Futures Decline

By Isis Almeida -
Apr 26, 2013

Buyers of coffee from Indonesia,
the world’s third-biggest robusta grower, are paying a bigger
premium for their beans as futures traded in London dropped and
local prices remained firm, according to Volcafe Ltd.

Indonesian coffee for May and June shipments was at a
premium of $90 a metric ton to the price on the NYSE Liffe
exchange, the Winterthur, Switzerland-based unit of commodities
trader ED&F Man Holdings Ltd. said in a report e-mailed today.
That compares with a premium of $80 a ton a week earlier.

While robusta coffee futures in London plunged 5.6 percent
over the past week to $1,975 a ton, local prices were little
changed. Indonesian beans were trading at 19,000 rupiah ($1.95)
to 20,300 rupiah a kilogram (2.2 pounds), Volcafe said. That
compares with 19,300 rupiah to 20,500 rupiah a kilogram a week
earlier.

“Offering differentials for nearby shipments have
tightened,” Volcafe said, referring to a discount or a premium
paid to obtain physical coffee in relation to the price on the
futures market. “Prices on the ground remain firm.”

Indonesia has started to harvest its 2013-14 crop and
production is set to climb to 11 million bags, according to
Andrea Thompson, head of research and analysis at CoffeeNetwork,
a unit of broker INTL FCStone Inc. That’s up from 10 million
bags a year earlier. A bag of coffee weighs 132 pounds.

Coffee bean deliveries from farms in Indonesia rose to
2,400 tons to 2,600 tons this week, up from 2,100 tons to 2,250
tons a week earlier, according to Volcafe. Harvesting still has
to start in the highland areas, according to the trader.

In Vietnam, the world’s largest robusta producer, sales
from farms “came to a standstill” as futures declined,
according to the report. Vietnamese beans for May and June
shipments were at a premium of $90 a ton to the exchange price,
up from a premium of $70 a ton last week.

“There is steady trade and industry demand in the market,
but business was very limited as a result of very firm
differentials,” it said.